Shruti Rajagopalan on India and the coronavirus

Overall, a lockdown in India is a good idea. Its healthcare infrastructure cannot handle even the flattest of curves, so social distancing not only flattens the curve but buys the government and private sector three weeks to increase capacity. In developed countries like the US, where capacity is high, the economic cost of shutdown is also high. But in India, the economic cost of a shutdown is lower, and the cost of a collapse in healthcare capacity because of premature stress is very high. So a lockdown in India makes sense for its conditions.

There are a few things to keep in mind to make this lockdown a success.

First, the Indian government needs to rely on its private sector healthcare infrastructure, which is many times larger in capacity and services than the government provided free/subsidized healthcare. There are 10 times more doctors in India working in the private sector than government hospitals. Especially in urban areas – where the initial outbreaks are most expected and feared – private healthcare functions very well. The government should pay for the testing and treatment of the poor and those who cannot afford, and allow those who can pay to directly get those services. During emergencies, there is a temptation to requisition private capacity, which in this case will only impose stress on the healthcare infrastructure. The government should pump a lot of funds into the health sector, but allow the private sector to provision and increase the number of beds, health workers, ventilators, masks etc. The current allocation of 150 billion rupees (about 2 billion USD) announced by Modi is too little. It’s about $1.5 per Indian. This amount needs to be increased many times over. The returns in terms of saving lives immediately, and improving healthcare infrastructure will be worth it in the long term.

Second, the government must resist the temptation to impose price controls and quantity controls and let the markets work. India has very local supply chains and all essential goods, mainly food and dairy, will be available easily. Price controls during a lockdown will only exacerbate the problem. A price is a signal wrapped up in an incentive. It signals shortages and surpluses and it also incentivizes buyers and sellers to adjust their behavior. Government imposed price controls must be avoided completely. India has banned exports of medical essentials like masks and ventilators, which is currently justified and sufficient. Indian entrepreneurs will respond to the emergency if prices are allowed to function and the dreaded Essential Commodities Act, which has significantly distorted prices in the past, and unintentionally prevented essential goods from reaching people, is kept at bay.

Third, India has lifted hundreds of millions out of poverty, but still has about 275 million living below the poverty line i.e. less than $1.25 a day. In addition to these, another 300 million are highly vulnerable to economic stress. 70% of Indians work in the informal sector, on short contracts, usually daily or weekly wage, and will have no income with a 21-day lockdown. Even after the lockdown is lifted, sectors like construction may not revive immediately. India needs to announce some kind of quasi universal income, or subsidy that is not means tested, for at least 700 million of

its 1.35 billion population. A minimum of at least Rs 2,500 a month (which is the Indian poverty line) to keep these Indians at home, and not desperate, is essential. If this has to be continued for three months, it would amount to ~2.6% of GDP. This is a stimulus which India can, under these circumstances, afford, and without which millions of poor may die because of the lockdown and not the pandemic. Without this, the chances of the success of the lockdown is low. It will also soften the aggregate demand contraction which is inevitable during a 21 day lockdown.

Finally, assume goodwill. There is a tendency to pass draconian measures in an emergency to punish the few hoarders and scamsters in any situation. The problem with bad laws that are only designed to prevent scamsters, whether it is for hospital funding, UBI-like subsidies, or removing price controls, is that it creates bad incentives for others, and discourages provisioning of goods and services by others, mostly operating on good faith. And the cost of punishing the scamsters in this emergency is too high. Assume some small percentage of people will take advantage of all this, and carry on.

The lockdown is the first step. But India must not squander the next 21 days, and prepare on a war footing to increase its healthcare infrastructure.

Comments

"A price is a signal wrapped up in an incentive"

Obviously an MR reader - that phrase has appeared twice on this blog in the last 24 hours!

Profit is the revenue not paid to workers.

The optimal strategy for the Inidian private health care industry is to provide maximum protect to the top 80% of health care workers, then treat as many patients as that labor force can handle by rationing care by price, thus treating the maximum number of high income and wealthy, with profits certain to be very high.

The poor will be denied care maximizing the number of spreaders creating the highest demand from the high income and wealthy population.

Exceptions in providing free care to those with gun and club skills is necessary to prevent the poor from burning down the system out of anger, and resignation they will suffer loss with certainty from economic theory arguing for their destruction.

That's why price gouging produces more price gougers and speculating produces more speculators. Working is for chumps. Be a middle man who makes money from price action because this is what society incentivizes.

I agree with most of what you say. It is somewhat comforting to see that most of the Indian states are scrambling to help daily wage earners via cash transfers and with free rations in some cases. Quite understandably, most of the conversations around "India COVID19 Twitter" and other circles are around two things: 1. how to get the health infra in place 2. how to help millions of workers who are very vulnerable. *I have a very naive question*, at a local/decentralised level do you think/know if Indian workers have access to any kind of community lending or fallback financing options? Is there any study on how contractor- construction workers(and other workers) financial relns work apart from the pay? Thanks.

" And the cost of punishing the scamsters in this emergency is too high. Assume some small percentage of people will take advantage of all this, and carry on."

A small village priced out of basic necessities will riot. Scamsters, hoarders, and gougers could face street justice. I agree that governments should probably play a light hand but those mentioned violent acts would be the trade-offs for doing so.

Realistically, can India even afford to roll out the eventual vaccines throughout the country? Given its poor state capacity.

If it cannot, then why even bother to flatten the curve? Just let COVID burn through the country naturally, and take the 5% loss (presumably death rate would be much higher than the other countries, given its state of healthcare infrastructure) and move on. A crapload of people will probably die under its current lockdown anyway.

These 5% are somebody’s parents, children, uncle, aunts, etc. you psychopath.

COVID-19 has exposed more racism than I thought it would.

It has also exposed more cold-bloodedness but that could be just hanging around too many libertarian blogs. I find liberals and conservatives more humane and compassionate than the autists here who cheer on price gouging and would rather sacrifice the population to the plague to keep the economy moving like some Stalinist.

Yes, not only the "keep the economy moving" ones (which includes the conservative Bolsonaro and possibly Trump?) but also ones like the author of the article being shared, asserting confidently and glibly that cracking down on hoarders and scamsters and price-gougers is necessarily going to be counterproductive.

At least in a crisis situation one should examine one's priors for applicability to the current situation, and not seek to push one's dogma, even if one thinks the dogma works well in normal times (to be fair I do see a small number of libertarians temporarily supporting a more statist or "progressive" approach for the duration of the crisis).

Cracking down on hoarders, beyond stores self imposed measures (which they will implement in the self interest of their business), means prosecutions and enforcement, against people who did things which were legal and may have overestimated future demand and underestimated supply. May not be worth it. "Down with this sort of thing!" is not sufficient reason.

Price gouging is illegal in 34 states. Limit buying as was done in the UK is another way to solve this problem. Formal rationing could also be used in more serious situations. What you don't want is a breakdown in public order, panic, or vigilantism against gougers because they ran out of toilet paper or food. That is a much more difficult problem to solve requiring more heavy handed state action. Why let it get to that point?

https://en.wikipedia.org/wiki/Price_gouging#United_States

Not just the UK, US retailers too.

If you even get close to a point of shortages. Why act long, long before that point? It's more likely in general, that business will respond rapidly, before shortages come into play.

Lockdowns are a luxury in India. As the author says ~500 million people depend on daily wages. It is them who might ultimately decide how long and effective this lockdown will last. Can they take an unpaid vacation for 20 days? I doubt it.

More realistic options are needed. It is quite possible, given that covid-19 has been around since Dec, millions are already infected. Lockdown is probably a sub-optimal strategy.

I do wonder how effectively Indian officials can really enforce this lockdown.

People have been talking about these supposed millions of asymptomatic infected people since January but, so far, no evidence of their existence has emerged. Believing this requires a belief that covid-19 spread almost everywhere in the world in December and started doubling every two days everywhere without anyone noticing.

India's GDP/capita is low enough and population young enough that, if our estimates if Covid19 mortality, it's prevalence already and spread in warm conditions are all wrong, this could indeed work out quite badly for them and much worsen living standards and worsen mortality.

And in "prevalence high, spread earlier, mortality low" news: https://www.ft.com/content/5ff6469a-6dd8-11ea-89df-41bea055720b

"The new coronavirus may already have infected far more people in the UK than scientists had previously estimated — perhaps as much as half the population — according to modelling by researchers at the University of Oxford.

If the results are confirmed, they imply that fewer than one in a thousand of those infected with Covid-19 become ill enough to need hospital treatment, said Sunetra Gupta, professor of theoretical epidemiology, who led the study. The vast majority develop very mild symptoms or none at all.

“We need immediately to begin large-scale serological surveys — antibody testing — to assess what stage of the epidemic we are in now,” she said. "

The modelling by Oxford’s Evolutionary Ecology of Infectious Disease group indicates that Covid-19 reached the UK by mid-January at the latest. Like many emerging infections, it spread invisibly for more than a month before the first transmissions within the UK were officially recorded at the end of February.

The research presents a very different view of the epidemic to the modelling at Imperial College London, which has strongly influenced government policy. “I am surprised that there has been such unqualified acceptance of the Imperial model,” said Prof Gupta.

Oxford joins the discussion... (The idea that we've caught the first spread has seemed ridiculous to me, and at exponential growth, even a few days earlier implies a vast asymptomatic population). Again this can be wrong but needs testing. We're not talking a suggestion by a few wingnuts here.

At current mortality rates Modi has just guaranteed he will not be re-elected this is going to throw a bunch of Indians into economic ruin and there just isn’t going to be enough dead people to point to as a worst case scenario to justify these measures.

Indeed this gives China an even bigger reason to keep lying and never release their actual death figures. Kneecaps their biggest regional political rival.

About spreading in warm conditions, the idea that warm weather will save us is becoming less and less viable by the day. Thailand, the Philippines (both are hot year-round), Taiwan and the state of Florida are all experiencing exponential growth in covid-19 cases. For that matter, so are South Africa and Australia which are just finishing with their summers. What these places were missing before is a critical mass of infected people. Now that they have that critical mass, the genie has been uncorked.

So far, a lot of countries at various GDP per capita levels and climates show remarkably similar growth rates in their numbers of covid-19 cases. Where we see slow growth, the most obvious explanation is effective social distancing and quarantine measures.

The only way to test this climate theory of covid-19 transmission is to randomly sample populations in different climates and we should see a correlation between the degree of undercounting and how far north the country is.

Just finishing their summer? It’s mid-fall.

The southern hemisphere's autumn equinox was five days ago.

That’s cool man what’s your zodiac sign? Meanwhile back in the real world Fall starts March first in Australia. Retraction forthcoming? I get that you are spreading panic (is that because you are a Leo).

Probably not a huge factor, but even 70-80% growth rate would matter.

Definitely, but what we see are the countries that are starting to bend the curve are either highly competent technocracies (first world Asian countries and we are starting to see results in Scandinavia) or else countries that have followed draconian lockdowns (China and we may be starting to see results from the Philippines).

The U.S. is doing so poorly at the moment that a moderate reduction in growth rate now would put them on a Western European trajectory, which is still poor.

https://www.bloomberg.com/news/articles/2020-03-23/swedes-try-laissez-faire-model-in-controversial-virus-response - Scandinavian technocracy?

This guy is a gigantic idiot. He has no idea what he’s talking about.

I don't think looking at undercounting from random samples vs Ident. cases would work tho. Seems very confounded.

"But in India, the economic cost of a shutdown is lower"

Tell it to the family making $60 a month that the cost of a shutdown is lower than in the USA.

Charitable read is author thinks that 70% rural subsistence Indian society that lives in small communities (and smaller still considering jati restrictions on socialising) have not much to lose from extreme social distancing measures, since they're pretty distanced already.

Seems bananas to me, but maybe it is so.

The economic cost to India is much greater because a smaller fraction of them are employed doing bullshit work that nobody is going to really miss.

Yes. The cost in dollars or rupees may be small, but the human cost of this lockdown will be huge. So huge that I wonder if it's even sustainable; how many Indian households can go three weeks without running out of food or money or both?

Its healthcare infrastructure cannot handle even the flattest of curves

This sentence is from a PhD in economics?

My comprehension ability is toast. But are you complaining on the semantics of the sentence or are you saying it is not true?

India has less than 1 physician per 1,000 population. China has double and threw all its resources to this one region to contain the spread. I kind of agree that even the "flattest of curves" will overwhelm the Indian healthcare system.

The World Factbook

The comment is logically independent of how good or bad India's healthcare system is. But if bashing India's system by quoting irrelevant-to-the-context stats from "The World Factbook" makes you feel better go ahead.

I truly did not understand your comment. My quote from "The World Factbook" does not show whether the healthcare system in India is good or bad. It is just to point out that India likely does not have the spare capacity needed during a pandemic.

"Not having spare capacity" counts as "bad", not "good", but that is all beside the point. Here is a hint - my point has nothing to do with India, rather just try to understand the case of a few hundred infections being imported with R_0 <= 1.

The stupidity here is just stunning. There is no way to lock India down for the amount of time it would take to avoid the virus from burning through the population. Most of the country lives hand to mouth. You are just going to get massive disobedience is the best outcome, and there are far worse ones the harder they try to enforce this.

In my considered opinion the only way out of the current situation is to quickly tie up with and activate food and grocery chains like Big Bazaar and D Mart to deliver to societies and few local points twice a week (under Police protection with strict norms on quantities per family) ! This is for the urban areas only! For the rural areas this is the right time to activate weekly deliveries of food grains and veggies through ration shops supervised by the local Panchayats !! Once such chains are established most of the people with be off the streets ! Needless to add basic hygiene of the delivery chain and social distancing during distribution is strongly recommended !

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